Wilful default may be stopped earlier

New RBI framework will allow banks to give early hearings to borrowers

- Subhash Narayan

Lenders may get more flexibility in dealing with potential wilful defaulters as the central bank may make in-person hearings with borrowers mandatory at the time of identifying a loan account as stressed, two persons aware of the development said. Earlier, in-person hearings were optional, and were conducted at the last stage just before classifying a borrower as wilful defaulter.

The Reserve Bank of India (RBI) is considering the change on the suggestions of banks, which believe that chances of making recoveries are higher if a dialogue is started at an early stage, the people cited above said on the condition of anonymity. The wilful defaulter tag shuts out borrowers from the formal banking sector.